By Soutik Biswas BBC News Online India analyst

Plans to sell of Indian Airlines have also hit the buffers

India's Supreme Court ruling on Tuesday, stalling government attempts to sell two key oil companies, comes as a setback for the country's chequered privatisation process.

But it is not the end of the road for the privatisation programme, which aims to raise 132bn rupees ($2.9 billion) in the current financial year ending in March 2004.

That is well nigh impossible now with the court ruling that since the two companies - Hindustan Petroleum and Bharat Petroleum Corporation - were formed by acts of parliament, they can only be sold off if parliament says so.

A clutch of private oil, insurance and banking companies were taken over by the Indian Government in the 1960s and early 70s and set up as state-run enterprises by acts of parliament.

No political consensus

"Technically, all that the oil companies' sale needs is the approval of the parliament. But since there is still no political consensus on privatisation, it will be extremely difficult for the coalition government to push it through," Dr Subir Gokarn, chief economist at the Credit Rating Information Services of India Limited (Crisil) told BBC News Online.

And with general elections likely to be held early next year, privatisation is grinding to a halt.

INDIA'S STATE COMPANIES Total number: 232 Number of loss making ones: over 100 Total net worth: $33bn

"Even if the court had given the go-ahead, the government would have waited for the elections to be over and sold the companies if it returned to power," says Dr Surjit Bhalla, managing director of Oxus Research and Investments in Delhi.

The failure of agreement among the country's fractious politicians on the need to sell off state-owned companies is the real obstacle.

"Without political consensus, it is difficult to push privatisation. There are a lot of partners in the ruling coalition who are opportunistic and against privatisation," says economist Dr Suresh Tendulkar, who teaches at the prestigious Delhi School of Economics.

There is also a feeling that more than a decade after economic reforms, privatisation remains at the mercy of petty politicking and vested interests.

"Privatisation is more of a political challenge in India than an economic one. The government should have put in a lot of effort at political marketing of the benefits of privatisation. As it has failed to do so, it has been painful and sporadic," says Dr Gokarn.

India's 232 state-owned companies make anything from condoms to steel. Almost half of them are loss making. But equity in only some 50 companies has been sold since 1991, according to India's department of privatisation.

Arun Shourie: Straight talking minister

It is ironical that the progress has been so slow considering that the privatisation programme has been largely untainted by allegations of corruption or undervaluation of state-owned assets.

Arun Shourie, the disinvestment minister and feisty architect of India's sell-off programme, is widely considered as an incorruptible man who speaks his mind.

"Disinvestments of state-owned companies are usually prone to allegations of underselling. But Mr Shourie's personal integrity has never been questioned, so his presence is a big boost and advantage for the privatisation process," says Dr Tendulkar.

Benefits of privatisation

The country's burgeoning middle-class is also more positive about privatisation now - thanks to improvements in some public services that it has brought about.

The huge response to public shares in Maruti - a car-making joint venture between the Indian Government and Japan's Suzuki Corporation - in June also proved that the people were enthusiastic.

"The people now realise that there is money to be made because of privatisation. They realise that it is in the public benefit. The grounds are that much more favourable now," says Dr Gokarn.

But, for the moment, all big-ticket privatisation is on hold.

Economists say the government should now stick to selling off small stakes in state-owned companies.